New category of contract in the Civil Code

Philipp Reusch

Lawmakers adapt general contract law to account for progressive digitization

The EU Directive on certain aspects of contracts for the supply of digital content and services (the Digital Content Directive) (PDF only in German) was adopted in the course of the progressive digitization of the internal market and the extension of consumer rights. The statute implementing this Directive into national law makes additions to contract law by inserting new Sections into the Civil Code, beginning with § 327, which establish contracts for digital products as a new contractual category as of 1 January 2022.

Unlike Directive (EU) 2019/771 on certain aspects concerning contracts for the sale of goods, which applies to the sale of goods with digital elements, the Digital Content Directive sets rules for contracts for the supply of digital products, which are defined in § 327(1) of the Civil Code as contracts relating to digital content or digital services. Under the Directive, "digital content" is defined as data which is produced and supplied in digital form, such as e.g. computer games, software and music files. The provisions of the Digital Content Directive also apply to consumer contracts relating to the supply of digital products in which the consumer provides personal data in lieu of payment ("paying with data").

In addition, the presence of defects in digital products is to be determined in accordance with the new definition of "material defect," under which products will have to meet both subjective and objective criteria in order to be considered defect-free. Moreover, the company selling the product is required to provide the consumer with updates in order to ensure that the digital product conforms to the contractual requirements for the duration of the contractually relevant period.

Practical notes

The provisions of the Digital Content Directive apply primarily for consumer contracts and to the degree that they affect B2B transactions, their principal effect is extending recourse claims in the supply chain. Companies will be able to make different arrangements with consumers in the future with regard to objective defects in digital products, even if those arrangements are to the consumer's disadvantage. However, they will only be able to do so if the consumer is notified before agreeing to the alternative arrangement, and if the deviation from the Directive is expressly and separately agreed upon in the contract. It remains to be seen what position the courts will take with regard to these statutory provisions, but a provision to the contrary in the seller's GTCs is not likely to satisfy these claims. Companies would therefore be well-advised to analyze the requirements of the Digital  Content Directive in advance and to revise their procurement and sales contracts in a timely manner.  

[September 2021]